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Theoretical results for gas market equilibrium modeling with application to Brazil

Author

Listed:
  • Steven A. Gabriel

    (University of Maryland
    Norwegian University of Science and Technology
    Aalto University)

  • Dominic C. Flocco

    (University of Maryland)

  • Filipe Ferreira Mazzini

    (Petrobras)

  • David Sotelo

    (Petrobras)

  • Kamaiaji de Souza Castor

    (Petrobras)

  • Mario Levorato

    (Petrobras)

Abstract

In this paper, we present an abstract view of natural gas markets to offer a theoretical discussion on the existence and uniqueness of equilibrium solutions. In the abstract model, each player solves a separate profit-maximization optimization problem, the first-order optimality conditions of which can be concatenated together along with market-clearing conditions to give rise to a mixed complementarity problem. The equilibrium-based approach features a general framework that allows for the analysis of a convex combination of price-taking and price-making strategies for producers with a particular Cournot coefficient. As a new motivation for such an analysis, we apply the model to a gas market in transition as is the case in Brazil, which has undergone significant regulatory changes aimed at making it more open and competitive. By demonstrating a sensitivity analysis of market competition on an illustrative Brazilian gas network, we offer new insights to competitive natural gas market modeling.

Suggested Citation

  • Steven A. Gabriel & Dominic C. Flocco & Filipe Ferreira Mazzini & David Sotelo & Kamaiaji de Souza Castor & Mario Levorato, 2025. "Theoretical results for gas market equilibrium modeling with application to Brazil," Computational Management Science, Springer, vol. 22(1), pages 1-48, June.
    • Handle: RePEc:spr:comgts:v:22:y:2025:i:1:d:10.1007_s10287-024-00527-w
    DOI: 10.1007/s10287-024-00527-w
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